The Economic Illusion by Robert Kuttner

black and white title textThe Economic Illusion: False choices between prosperity and social justice  by Robert Kuttner (1984)

Robert Kuttner has become a favorite author because he really knows his stuff and is a very good writer making for an enjoyable read. He is also the author of Debtors’ Prison: The Politics of Austerity Versus Possibility. This book had one of my favorite chapters ever, titled The Moral Economy of Debt [link to come later], basically pointing out the contradiction between the treatment of bankruptcy by individuals as a moral failure contrasted with the get out of jail free card by failed corporations (like Donald Trump’s 4 instances where he sheltered his personal wealth from the risk he took with his businesses).

In this book he makes the case that social justice does not preclude a dynamic economy. This book written a tad more academically than his later books, but is fascinating also because of the date it was published –  1984! [nod to Orwell fans out there since what he discusses is exactly true today] Here are some long quotes from the book.

Seriously though, all the absurd political positioning today still evolves around the same damn thing: makers and takers. So called job creators that really just put their millions and billions off-shore, avoid paying taxes on any of it, actually get back tax refunds because of the corrupt IRS rules and clever accountants and lawyers, are the takers – oops, no they are the “makers” (according to Republicans). Who wouldn’t love to get the millions or more that the multinational oil companies get as SUBSIDIES for a hungry child’s sake! Sure they pay a token for their oil leases, but they then have NO OBLIGATION TO GIVE AMERICANS first access or cheaper access to that oil drilled from our land. We are subsidizing them to make billions, despoil our country and the surrounding waters, and frack the fuck out of the land creating multiple constant earthquakes and producing toxic wastewater that is killing and will kill life as we know it if they are not stopped.

But I digress. What I really am talking about here is social justice which is progressive speak for welfare. Welfare was demonized by St. Ronnie Reagan deliberately, which is especially sad when you realize that before this we had a president who created Social Security, and then Medicare, and now, “God Willing” (ha ha since God is owned by the conservatives) we may, with a Bernie Sanders election as President, get single payer / medicare for all – with no fucking religion mandating what may or may not be covered.

Single payer is somewhat different from Medicare because not only is the managing institution a non-profit, government agency, but is intended to cover ALL expenses, that is to say, no co-payments, no high deductibles, and so forth that comes back to bite you when you least expect it. I also hope that it will be modified to stop the insurer from deciding what is “medically necessary” and let the doctor and patient decide. For example, the blood test for vitamin D levels. I have bitterly denounced the Medicare policy on this test previously; “too many” people were asking for it so Medicare decided not to cover it and it costs $200 + dollars and you need two, one before to check levels and one after to see if the RX dosage has brought your level up enough. It is particularly known to be crucial to improve the condition of people with multiple sclerosis and so is, at least for us, critical. But it is reasonable to assume that if other people have low levels it has a health impact as well, even if they don’t have a strict 1:1 correlation to justify the testing. Plus, theoretically, if the test were ordered more, shouldn’t the price come down? (ha ha ha ha medical prices come down, ha ha ha ha!)

I mean, how can people be opposed to good medical care as a human right when $80,000 missiles are used as if they were toilet paper? How can they have signs saying “keep your hands off my medicare” and “no socialized medicine” at the same time? Willful ignorance and drinking the Faux news Kool-aid? Similarly, conservatives don’t want their tax dollars going for abortion and contraception, because you know, life. While our soldiers are sent to die in war for oil for Halliburton profiteers.

The evolution of the welfare state reflects an ongoing conflict between two incompatible systems for distributing income [I would say wealth here]: need and market. Socialism is based on the distributive principle “to each according to his [sic] needs.” [Unregulated] Market capitalism distributes according to wage income and private property — to each according to initiative, INHERITANCE and private property.

I would really like to have an interview with him to discuss his current views on some of this chapter. I am a little confused why he would specify wage income but not investment income, that is, capital gains, since that is a crucial factor in the dramatic increase of income inequality.

There was a Facebook post recently by a fellow I am following who is an advocate for universal basic income (UBI) that is intended to provide every person with enough basic income to pay for housing and food and utilities. [I have to double check if this is means-tested or not, presumably not since “universal” but this is why it is unlikely to ever happen in this country.] This would end up being cost effective because then you wouldn’t need food stamps and other bureaucratic departments to piecemeal assistance, or allow aid to be conditional on urine tests, or discrepancies between states for assistance. This would be tremendously empowering for workers who would not have to live under the constant threat of [the lie of] “at will” employment since the capricious and bullying behavior of bad bosses would not result in having a choice between suck it up or hunger. If the corporations would just stop cheating on their taxes and contribute to the public good, this would be possible. But it is NOT in their interest to do so because they enjoy having the absolute power of life and death over the workforce. Anyway this post put the concept of UBI in a nice simple way.

Suppose you have an idea and make something with another person. What would be a fair split on the profit? 50/50 most likely. Three people? Again, equal shares, and so on. He went on to say, well a company can’t make money without the contributions of the workers so UBI is simply a way to make sure that people get a share of the wealth other than mere wages determined by capitalists who value their $$$ contributions higher than the lives of workers spent dedicated to make the business successful. Early on when corporate charters were first discussed, their role was to be constrained by the fact that they were allowed to incorporate to serve the community. This has been corrupted to actually be detrimental to the community for the advantage of the shareholders and CEOs. They could have mandated employee shares, but did not, and that is a shame because employees toil spending something more precious than capital, they spend the majority hours of their lives for other people to live in wealth and comfort and security in their homes and persons.

Unlike most of Europe, we have no general program of family allowances; instead we subsidize the expense of child-rearing by means of tax exemptions. This approach is distributively regressive, since a $1,000 tax deduction gives a high-bracket family more tax subsidy than a low-bracket one. A very low-income family, with no tax liability to shelter, gets nothing. We also use a tax credit to subsidize the costs of day care, rather than offering a comprehensive day-care program. The very limited subsidized day-care centers that do exist are part of “poverty programs,” and restricted, by definition, to the poor. In housing policy, tax subsidies for home ownership are available as a matter of right for the middle class and the wealthy, but there are no housing cash allowances for the poor. A separate program of housing for the poor exists, but not as an entitlement; it has been funded so minimally that only about one family in ten that qualifies for subsidized housing actually lives in a subsidized house. [He is speaking of England I think, in America there is no subsidized “house” only “housing” that is, multi-family. Last I checked locally, there was a huge waiting list years long.] (p. 239)

And for obvious and reasonable or prejudicial reasons, many private landlords would not participate. People are not well-behaved, even I think when it is in their vested interest to do so.


This book is outdated in some details, but I suspect things are actually worse than when the welfare system in the U.S. was analyzed for this book. There are a number of really good assessments about the general problems that I know are true today. For example, the inadequacy of the minimal stipends that are not funded enough to “keep recipients out of poverty” and are not a right but are means-tested benefits. Conservatives assert that “welfare” makes people lazy, and even President Bill Clinton bought into the bootstrap myth to make even below poverty subsistence conditional on workfare requirements. And of course, the major impact of this regressive policy negatively impacts single mothers with children. They are now required to work, which means childcare, and they are responsible for paying that bill. And if they were so fortunate to earn a little bit “extra” to save for car repairs so they can continue to drive to work, they run up against the means-testing barrier. So the financial assistance is parsimonious and requires mothers to leave their children, and punishes them when they manage to get a little ahead of poverty, which is set incredibly and unrealistically low. At a minimum the poverty level should be based on the cost of rent or mortgage, car payment, utilities including CABLE TV and the INTERNET because these are essential to contemporary life to be an informed citizen and the cheapest kind of entertainment available (a working mom comes home and does not have time or energy to do all the housework, cooking from scratch, laundry, AND perform educational games for their kids plus help with homework).

The rich and the Republicans have made the very concept of welfare a dirty word. To be on welfare is to be a failure, a cheat, undeserving, and a “taker” from the poor hardworking stiffs. And the entire process is almost calculated to be as time-consuming, humiliating, shaming, and punitive: urine testing. The check for male companions presence in a home (bed checks) automatically means that you don’t need welfare, you have a man to pay for your family. How that does not make single moms prostitutes I am not really clear.

What means-testing does is make everyone who needs some assistance to rise above poverty (or at least reach minimal subsistence) to become a pauper to become “deserving” of assistance. So if a family has two cars, even if the parents work on opposite sides of town, they may have to sell one and spend the money on food before their assets are depleted enough. IT DOES NOT MATTER IF THIS IS STUPID and counterproductive, because to buy another car becomes an insurmountable barrier, or taking the bus to one requires an hour on each end of the commute, stealing hours of a peoples lives. This requirement to permanently sell depreciated assets that cannot be recovered for the same cost simply serves to strip people having temporary trouble from having nice things.

In cities like New York, San Francisco, and many other major cities, average workers cannot afford to live near where they work, only the affluent can afford the rent much less the mortgages on multi-million dollar homes. So instead the average workers pay with hours of their lives. The hour commute by train from the suburbs if you are lucky, or a long freaking two-lane road to drive your clunker in the winter to get from outlying towns to work in the shops in Aspen. There is a complete inadequacy of public transportation everywhere. People who live in small towns outside of medium ones have no option but to drive to work. And sometimes, they even have to pay $10 a day or more for the privilege of parking perhaps multiple blocks away (hard on disabled, aging, or injured employees). Add the cost of day care, the cost of appropriate work clothing (why can’t we all just wear jeans and get over the whole suits and high heels bullshit?), insanely overpriced make-up to equal the idealized Photoshopped and make-up of movie stars as the standard for what the average woman “should” look like to be professional.

Oh and one comment for the eco-warriors that want people to ride bikes everywhere, first of all, many people would have to change clothes and shoes at the office, take a shower maybe, and ignores reality of weather like 30 below with wind chill. Plus makes it hard to stop by grocery store for a big buy, pick up kids, or drop them off, go to a dentist appointment, or a myriad of other things. No, our American lifestyle and cities and suburbs and small towns have developed as they are because of cars and the efficiency and control and convenience and availability for emergencies, and visits to friends and families without standing on the street wondering if you missed the last bus. The entire urban infrastructure needs to be rethought entirely to avoid cars as a necessity and/or give poor and disabled people an accessible transportation system.

Many states have regressive sales tax policies that are directly aimed at punishing poor people who would make “bad choices” like buying potato chips or soda pop, and the now infamous TAMPON TAX that is punitive for women because the sanitary products are a medical necessity. Fortunately some brave women started a social media campaign to make this potential change. And I think the aid to families today doesn’t include diapers, so I guess women are suppose to use cloth diapers and pay a cleaning service or hope they have a washer/dryer but most likely will have to take to laundromat. A concept I would bet virtually no politician even considers when they claim people aren’t poor any longer because they have access to REFRIGERATORS. The same politician, I think, said people can’t be poor if they have a cell phone. I guess they are supposed to live without electricity, get water from wells, shit in an outhouse, and use a horse and buggy for transport if they are poor.

While I was writing this, Samantha Bee, on her new show, Full Frontal, did an awesome story on the diaper issue pointing out the facts and reality to ignorant Republicans (even a woman!) when denying the right for mothers on assistance to have funds to pay for disposable diapers. The attitude was, let them use rags (only a slight exaggeration).

In effect, the American welfare state perpetuates the older distinction between “deserving” poor and undeserving poor. Under the Social Security Act, an orphan is deserving, while a bastard is deemed undeserving. A minor child with a deceased father collects a government benefit that substitutes for a portion of his late parent’s lost income. The benefit comes as a matter of right, under the Social Security “survivorship” program, WITH NO MEANS TEST. It does not matter whether the family has money in the bank, or how the mother spends her social life. However, if the child is “dependent” because his father is absent or unknown, his case comes under a different provision of the law. The mother is treated as a fallen woman [how quaint!] rather than a deserving widow. In order to collect a “welfare check under Aid to Families with Dependent Children [remember written in 1984] the mother must demonstrate she has no substantial savings, no earned income, and NO MAN assuming the role of a spouse. [Loosely considered to include dating a man.] (p. 240)

As one Republican put it, the best thing for a single mother to do is get married. Pretty sure the men out there are not interested in being married to support another man’s children or a woman at their own expense, generally speaking. And is it really appropriate to say that single mothers should have to be married to be able to afford to live and support her child/ren? See prostitution remark elsewhere in this piece. Is having children a public good? If the State has an interest in forcing women to give birth, then why don’t they have an obligation to provide at least as much as a regular orphan is entitled to?


Our Medicaid program, also means tested, is the only such separate medical program for the poor in the industrial West. By default, we have created a “system” of nursing-home care for the aged in which middle-class people pay exorbitant rates to FOR-PROFIT nursing-home entrepreneurs — and then when private resources are consumed and the patient qualifies as a pauper, the nursing home begins billing Medicaid. This is precisely the antithesis of social citizenship; instead of the poor being accorded the dignity associated with the middle class, equality of treatment is achieved by making the middle class undergo pauperization. (p. 239)

And they make doubly so by continually moving the goal posts with extending the “look back” periods from 3 to 5 to now 7 years I believe so that you must transfer ownership of any assets to your children, for example, 7 years before you know you will need assistance. That doesn’t do anyone who suffers a disabling stroke unexpectedly at say 50 years old. And as the biggest abusers of the elderly are their own children, there is nothing to say that the kids would sell the house and leave mom on a street corner. (Someone actually did this awhile back to a demented grandfather but they were tracked down. Not sure what the result was though.) So for another example, let’s say you agree to pay the tuition for your granddaughter’s college. Two years later you have a stroke. The Medicaid system is OBLIGATED UNDER LAW to go after any assets transferred within the time that includes the college tuition. They can legally attach the income of the granddaughter for reimbursement. And if you die, all expenses paid by Medicaid are REQUIRED BY LAW to be attached to your estate, so there would be no way to leave anything to your children whatsoever. Because ONLY RICH PEOPLE DESERVE TO KEEP THEIR WEALTH through trusts, reduced inheritance taxes, and simply being rich enough to be able to afford 24×7 nursing staff in their home should they need it. Only middle class people have to sell their only asset, usually house but maybe car, and all their worldly goods before they “deserve” any help. Even giving someone a birthday gift of money is prohibited because if you have money to give someone, you shouldn’t expect the TAXPAYERS to pick up a nickel of it by making it up in assistance.

On one level that sounds fair, at least to one wealthy individual who told me so. (ha ha) She said well sure it would be nice to be able to leave your house to your children [especially in the economic situation we face today] but the TAXPAYERS shouldn’t have to pay your bills for you to be able to do so. Well, I for one, would very much like the RICH PEOPLE WHO ARE NOT PAYING RELATIVELY EQUITABLE TAXES, and their corporations to pay so that the poor guy making $30,000 a year ISN’T having to pay out a substantial portion of pay to taxes that really just subsidize corporations and the rich, especially when you consider that the capital gains tax is much less than the wage based income tax.

There is no cap on how much assisted living or “memory care” private facilities can charge or what they are obligated to spend per person in actual services provided. Some towns may not even have a facility that accepts Medicaid elderly because Medicaid does put a cap on what they will pay. (About $2,500 I think compared to a private pay patient charge of $4,000 to $6,000 A MONTH!!!!!!!! And furthermore, it requires you to have no more than $3,000 or you are kicked off the program. So even if you have $3,001 — which is not enough to pay the private rate, the strict review would deny payment. The $1 hypothetical could of course be spent on anything for the person in care, like flowers or candy BUT NOT, GOD FORBID, a birthday gift of $1 to a child. Previously, I was told, people were able to pay the difference between the excess directly to the state, so that would be the $1 over you would pay. But recently officially that practice had been disallowed for reasons no one could tell me. It is unbelievable stupid, of course, but reality often seems to be different from the lawmakers rather than actual reality. Like the diaper thing again. Or the vitamin D restriction, or the lymph edema sleeves for breast cancer survivors (though some legislation is pending to allow as durable medical equipment). Or for that matter, why the fuck aren’t hearing aids covered as durable medical equipment? I’m guessing because TOO MANY PEOPLE NEED THEM, glasses too. We need single payer that will cover all that and dental too. Bernie Sanders plan does include dental care (which can contribute to heart issues, BTW) and vision. I have to check on the hearing aids but I think he would.

When I was having a really bad time dealing with this process for my mother, I was horrified at the documentation I had to find and provide. I started doing it for myself too, on general principle, but have let it languish now without completion because I am a terrible procrastinator. I was lucky that, since she was already full on demented, that I was able to find her original birth certificate (1922), her license converted to an id, and her expired passport from when we went to Europe together after my dad died. They are VERY VERY concerned that you be an AMERICAN citizen, naturally enough I suppose, given the insanely overpriced and as near as I can tell unregulated elder care facilities that are cropping up like gangbusters here now, all “luxury” style, pretty sure all do not take Medicaid clients. The few beds they may have been mandated to allocated to Medicaid (like 4 or 10) are kept in reserve for when the $150,000-$200,000 you have to pay to gain admission to these facilities. So you basically have to sell all you own, leaving your children nothing (unlike the wealthy of course, who just keep on building that pile of gold by low inheritance tax and capital gains or dividend interest to live off from), and then hope you live long enough that your investment is worth it. BECAUSE THERE IS NO REFUND to the estate. So if you are admitted, after paying your $150,000 (probably plus some application fees and other bullshit because, profit) and you die a month later, THEY GET TO KEEP THE $150,000 not $150,000 – one month “rent” and “care” but all of it.

When I was complaining to my shrink how dreadful this system was and how few people had that kind of money for a “buy-in” to the “luxury” places (really pretty sure gold taps and marble foyers are really necessary, or whatever the fuck else they do to dress these places up for people who can very likely not remember where they live at all). Anyway, she told me, well, it is unreasonable for you to expect the taxpayers to bear the cost of your mother’s care. And I was dumbfounded. Like so many Republicans and conservatives, they do not seem to recognize a public good use of tax dollars when they see it. What are people who don’t own homes supposed to do? There are millions of people who don’t own a home and don’t have a hope of ever earning $150,000 much less increasing pricing over $200,000.

The answer in the olden days, is that family’s took care of them. Well, news flash, women do not have the 7 to 13 children to distribute the burden of care across a family. Women in their 40s and 50s are likely to be dealing with their own kids and grand kids. Plus THEY ARE WORKING. You can’t leave babies home alone and you can’t leave people with dementia home alone. Adult day care is rare and pretty dreadful. Your house might be underwater and so you can’t sell it to move to a larger one for mom or dad to move into so they would be close to care for, and also, since we do not have to rely on horses, and are not pre-train, family members spread all over the country. So you have to choose to take the demented person out of their home and away from friends and local family to care for in other states. Or you have adults of demented parents taking shifts, either flying in to care for aged parent in their home for a short period of time (having to leave their jobs, and families) or the parent has to be moved around to children’s homes who may not have a spare bedroom. Or again, renting. With the recession, with the non-equal pay of women, and the devalued nature of many women-predominant professions (teachers, nurses), losing time off work is a problem, loss of wages is a problem, and only the wealthy could afford to fly about the county to do care shifts.

In short, we are in the middle of a mostly ignored crisis in elder care. A common joke is that you could spend less money going on a year long cruise with better food than you get at assisted living facilities for your $150,000. Unfortunately, dementia takes away that choice because they really need to be supervised or they will harm themselves or others.

Since we are living in a world with virtually no social justice now and they do so by the false dynamic Kuttner speaks of: that we can have prosperity or social justice, but not both, there is little hope that anything will change. Certainly the FOR-PROFIT elder care industry doesn’t want to stop the gravy train. They don’t have a rule about how much allowance per day is for food budget. Their “rent” comes out way over market, and they charge minutia like two showers a week cost more than one shower a week. On one hand, that seems reasonable since it requires the labor of a staffer, but for $6,000 a month, can anyone credibly thing that it shouldn’t be enough to cover two showers a week?

So we end up with chiding messages when calling the state Department of Health and Social Services about be sure to save enough for your retirement when many people are going to need long term care at retirement. Especially since they keep trying to move the goal posts to older retirement DESPITE THE FACT THAT getting older has consequences directly related to ability to perform many jobs. Hence we get so many senior citizens flipping burgers to make ends meet because Social Security is not enough to live on. And anyone who says it was meant to be supplemental income is a liar or a fool or rich (oh wait, that might be redundant).

We laboring class should not have to WORK UNTIL WE DIE. We also shouldn’t have to wait until we are TOO OLD to enjoy retirement. With a paltry standard 2 weeks of paid vacation (and not everyone even gets that) — contrast with France or any other western industrialized nation — and it becomes obvious that we workers are getting screwed. No child care support (other than tax credit that only helps wealthy see discussion above I think), no publicly funded college education as a public GOOD. No HEALTHCARE for all for the public good paid for by pooling taxes for this purpose rather than buying worthless military trillion dollar failed balloon experiments. IT IS NOT YOUR FUCKING MONEY THAT WOULD PAY FOR ABORTION OR FOOD FOR THE POOR. You can just pretend your money is going to the machines guns. But let the rest of us who have a sense of humanity and the public benefits of so many things at least have the chance to have OUR TAX DOLLARS go to feed the hungry, vaccinate children, provide shelter for the homeless that doesn’t kick them out on the street the next morning. And so much more. More people would be happy instead of angry, relieved instead of stressed out all the time. Eliminate the time limit on unemployment. How shitty is that to say, if you can’t get a job, any job, you must be a lazy drug user and don’t deserve any further assistance. The conservatives are obsessed with what poor people spend their money on: hence the drug testing for food aid, because if you use drugs you have money so you should just overdose and eliminate the problem. The kindly Christians in Oklahoma don’t want you spending THEIR HARD EARNED DOLLARS on steaks that the low wage earners can’t afford. Or seafood. Or pop. Or chips. Or diapers. Or tampons. Or whatever they deem a luxury. Miserly little shites should scrutinize the Congress’s personal expenditures using taxpayer money so closely. Or for that matter, their spending of ALL OUR HARD EARNED DOLLARS. Even better, let’s do a lot of scrutiny of the BILLIONS OF NON-HARD EARNED DOLLARS, like the wealth of the Clintons, the wealth of Mitt Romney, the wealth of the Koch brothers. The wealth of all those creationist museum developers making amusement parks out the theoretically sacred truths of their Bible, despoiling all possible rational thought by the flock witnessing a factually false presentation of the dinosaurs living in peace with humans.

Must stop of will vomit.

Please please make them stop. Where are the sane people? Where are the people who should be shouting down the demagoguery of Trump and Cruz? No, the media just plays along pretending objectivity instead of laughing their assess off and shaming and ridiculing and pointing out the serious flaws in the proposed policies and laws PLUS the illegal laws that have been passed, mostly about abortion, but now they are going after the LGBT and Muslims and Mexicans, and pretty much anyone not a good old white boy bible-thumper who likes his woman barefoot and pregnant and ready to service him at any moment of the day or be shown who’s kind of the house as women are to be submissive to their husbands, tyrants or not.


So I spent some time putting Post-it notes to mark all the fun paragraphs and explanations that really helped me understand aspects of “Trade” and “Capital” and “Labor” and so on as he has organized the book in this way. But I ended up with a lot of notes. So then I decided to “speak-type” some passages, and everything was so spot on applying to our exact situation economically and so on today, and he identified so many of the fallacies and called out the bullshit (supply-side lie of Reagan) and pretense that corporatism’s goal is to force workers to accept lower wages, because they can. Even when it has been proven to be against their interests ultimately. As Robert Reich has said, repeatedly, consumers need to be able to afford to buy products to have growth. Low wages don’t make that possible.

Anyway, there was just so much excellent, logical, rational, and reasonable commentary in this book, you should just buy it. Since it is older, might have to go to used books.


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